Topsports International Holdings (HKG:6110) Has Affirmed Its Dividend Of CN¥0.2129

Topsports International Holdings Limited (HKG:6110) has announced that it will pay a dividend of CN¥0.2129 per share on the 22nd of August. This makes the dividend yield 9.7%, which will augment investor returns quite nicely.

View our latest analysis for Topsports International Holdings

Topsports International Holdings' Dividend Is Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained. Topsports International Holdings was earning enough to cover the previous dividend, but it was paying out quite a large proportion of its free cash flows. By paying out so much of its cash flows, this could indicate that the company has limited opportunities for investment and growth.

Earnings per share is forecast to rise by 32.8% over the next year. If recent patterns in the dividend continues, the payout ratio in 12 months could be 82% which is a bit high but can definitely be sustainable.

Topsports International Holdings' Dividend Has Lacked Consistency

Looking back, Topsports International Holdings' dividend hasn't been particularly consistent. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. The annual payment during the last 5 years was CN¥0.24 in 2019, and the most recent fiscal year payment was CN¥0.36. This means that it has been growing its distributions at 8.4% per annum over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

The Dividend's Growth Prospects Are Limited

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Topsports International Holdings has seen earnings per share falling at 3.1% per year over the last five years. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth. Earnings are forecast to grow over the next 12 months and if that happens we could still be a little bit cautious until it becomes a pattern.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While Topsports International Holdings is earning enough to cover the dividend, we are generally unimpressed with its future prospects. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for Topsports International Holdings that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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